According to a survey by the Society for Human Resource Management, 60% of employers are using credit checks when filling at least some of their openings. Only 35% reported checking credit in a 2003 survey, and only about 13% did so 1996.

The timing could not be worse.

"At exactly the time everyone's credit seems to be going down the toilet, more and more employers are using this," said Nat Lippert, research analyst for the union Unite Here. "You get in a Catch-22: You can't pay your bills because you don't have a job, and now you can't get a job because you can't pay your bills."

Unite Here has been active in a recent push for laws to greatly limit employer's use of the credit reports in hiring decisions.

So far three states have passed such laws -- Hawaii, Oregon and Washington, and legislation has already passed in Illinois and is headed to the governor. The laws would make it illegal for employers to access credit history unless they can show that it's relevant to a job's duties, such as handling money or having access to customers' financial information.

Bills have been introduced in 16 other states and the District of Columbia, and Federal legislation is currently pending in Congress.

Businesses have pushed back hard against such laws.

"Is it helpful to the employment process? Employers seem to think yes. They don't spend money on products they don't think bring value" said Stuart Pratt, CEO of Consumer Data Industry Association, the trade association for the credit rating agencies.

Pratt says that a credit check gives employers details about accounts in collection, debt levels, bankruptcies and other problems that would cast doubt on someone's ability to handle responsibility. It does not report credit scores or account numbers.

Pratt also argues that the credit histories are only one factor considered by employers, and that prospective employees are supposed to be given the chance to respond to what their credit check turns up.

But consumer advocates and some job seekers say that candidates are being unfairly judged by the circumstances of their private lives.

"Employers have adopted this method as a proxy for character reference, believing it reflects on people's ability to handle responsibility," said Ben Woolsey, director of marketing and consumer research for CreditCards.com. "That's a bit of a reach."

Tai Davis used to work in information technology for a financial services firm. Part of her job was helping customers who had been victims of identity theft or other fraud.

"I had access to the social security numbers, credit card numbers, home addresses, bank account numbers of millions of people. For years I safeguarded it," she said.

Davis said she had medical problems that caused her to miss a lot of work. When she returned from medical leave, she found she had lost her job. With $20,000 in medical bills and no work, her credit eventually took a dive.

"I have been told I can not be hired because of my credit. They will not even interview me," she said.

Davis said she has applied for all types of jobs, not just financial services. She said a bankruptcy filing would help her fix her credit but she fears it would be an even greater barrier to finding work.

James, a cashier from Nashville who asked that his last name not be used, admits he had bad credit when the store he worked at closed in October 2008. He said he soon had two job offers at other stores, but that both disappeared when his credit history was checked. His unemployment left him homeless for a time in 2009.

James attributes his bad credit to a divorce a few months before he lost his job. "I did the best I could, but at one point, it was make my car payment or make my child support payment and I picked child support. They repossessed my car," he said.

James said that despite his credit problems, he was an honest worker and never stole a penny from the large deposits he was entrusted with.

Indeed, consumer advocates say the overwhelming majority of job applicants with credit problems don't steal from their employers and it's unfair for their credit situation to be held against them.

"In this economy there are all types of very good candidates who will show up with credit problems that have nothing to do with their ability to do the job," said Maurice Emsellem, policy co-director for the National Employment Law Project.

In Buffalo, New York, the city is selling vacant homes for a $1 to those who are willing to fix them up and live in them for a few years. But as many buyers soon find out, the cost to renovate these super cheap properties can quickly add up. More